Stock Agreement
▇▇▇▇▇▇▇▇.▇▇▇, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
October 18, 1999
TABLE OF CONTENTS
Page
SECTION 1 AUTHORIZATION AND SALE OF SERIES A PREFERRED STOCK 1
1.1 Authorization of Series A Preferred Stock 1
1.2 Sale and Issuance of Series A Preferred 1
SECTION 2 CLOSING DATES; DELIVERY 1
2.1 Closing Date 1
2.2 Delivery and Payment 1
SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY 2
3.1 Organization and Standing; Certificate of
Incorporation and Bylaws 2
3.2 Corporate Power 2
3.3 Subsidiaries 2
3.4 Capitalization 2
3.5 Authorization 3
3.6 Proprietary Rights 3
3.7 Registration Rights 4
3.8 Governmental Consent, etc 4
3.9 Offering 4
3.10 Permits 4
SECTION 4 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS 4
4.1 Preexisting Relationship with Company; Business and
Financial Experience 4
4.2 Investment Intent; Blue Sky 4
4.3 Rule 144 5
4.4 No Public Market 5
4.5 Restrictions on Transfer; Restrictive Legends 5
4.6 Access to Data 5
4.7 Authorization 5
4.8 Brokers or Finders 6
4.9 Tax Liability 6
4.10 Limited Operating History 6
SECTION 5 CONDITIONS TO CLOSING OF THE PURCHASERS 6
5.1 Representations and Warranties Correct 6
5.2 Covenants 6
5.3 Blue Sky 6
5.4 Restated Certificate 6
5.5 Investor Rights Agreement 6
SECTION 6 CONDITIONS TO CLOSING OF THE COMPANY 6
6.1 Representations and Warranties Correct 7
6.2 Covenants 7
6.3 Blue Sky 7
6.4 Restated Certificate 7
6.5 Investor Rights Agreement 7
SECTION 7 MISCELLANEOUS 7
7.1 Governing Law 7
7.2 Entire Agreement; Amendment 7
7.3 Notices, etc 7
7.4 Delays or Omissions 8
7.5 Expenses 8
7.6 Counterparts 8
7.7 Severability 8
7.8 Titles and Subtitles 9
EXHIBITS
A. Amended and Restated Certificate of Incorporation
B. Investor Rights Agreement
C. Schedule of Exceptions
▇▇▇▇▇▇▇▇.▇▇▇, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
This Series A Preferred Stock Purchase Agreement (this
"Agreement") is made as of October 18, 1999 by and among ▇▇▇▇▇▇▇▇.▇▇▇,
Inc., a Delaware corporation (the "Company"), and Rational Software
Corporation (the "Purchasers").
In consideration of the mutual promises and covenants contained
herein, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
SECTION 1
AUTHORIZATION AND SALE OF SERIES A PREFERRED STOCK
1.1 Authorization of Series A Preferred Stock. The Company has
authorized the sale and issuance to the Purchaser of up to 80,000,000
shares (the "Shares") of its Series A Preferred Stock, par value $0.001
per share (the "Series A Preferred"), having the rights, preferences,
privileges and restrictions as set forth in the Amended and Restated
Certificate of Incorporation in substantially the form attached hereto
as Exhibit A (the "Restated Certificate").
1.2 Sale and Issuance of Series A Preferred. Subject to the
terms and conditions hereof, the Company will severally issue and sell
to the Purchaser and the Purchaser will severally buy from the Company
up to 80,000,000 Shares at a per share purchase price of $0.625 (the
"Per Share Price"), and at the aggregate purchase price of up to
$50,000,000.
SECTION 2
CLOSING DATES; DELIVERY
2.1 Closing Date. It is anticipated that purchase and sale of
the Shares hereunder shall be consummated at a closing (the "Closing")
held at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ within 45 days of the signing of this
Agreement, or at such other date, time and place upon which the Company
and the Purchasers shall agree (the date and time of the Closing is
hereinafter referred to as the "Closing Date").
2.2 Delivery and Payment. At the Closing, the Company will
deliver to each Purchaser a certificate or certificates, registered in
the Purchaser's name, representing the number of Shares to be purchased
by the Purchaser at the Closing, against payment of the purchase price
therefor, by check payable to the Company, by wire transfer per the
Company's instructions, or by any combination of the foregoing.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser that, as of
the Closing Date at which the Purchaser consummate its purchase of
Shares hereunder:
3.1 Organization and Standing; Certificate of Incorporation and
Bylaws. The Company is a corporation duly organized and existing under,
and by virtue of, the laws of the State of Delaware and is in good
standing under such laws. The Company has requisite corporate power and
authority to own and operate its properties and assets and to carry on
its business as presently conducted. The Company is presently qualified
to do business as a foreign corporation in California and there is no
other jurisdiction in which the failure to be so qualified would have a
material adverse effect on the business or financial condition of the
Company. The Company has furnished the counsel for the Purchasers with
copies of its Restated Certificate and Bylaws. Said copies are true,
correct and complete and reflect all amendments now in effect.
3.2 Corporate Power. The Company has all requisite legal and
corporate power and authority to execute and deliver this Agreement and
the Investor Rights Agreement in substantially the form attached hereto
as Exhibit B (the "Investor Rights Agreement" and, together with this
Agreement, the "Investment Agreements"), to sell and issue the Shares
hereunder, to issue the underlying Common Stock (the "Conversion Stock")
in accordance with the provisions of the Restated Certificate, and to
carry out and perform its obligations under the terms of the Investment
Agreements.
3.3 Subsidiaries. The Company has no subsidiaries and does not
otherwise own or control, directly or indirectly, any equity interest in
any corporation, association or business entity.
3.4 Capitalization. The authorized capital stock of the Company
consists of 125,000,000 shares of Common Stock and 80,000,000 shares of
Preferred Stock, all of which have been designated Series A Preferred
Stock. As of the date hereof, the total number of outstanding shares of
Common Stock is 20,000,000. Immediately prior to the Closing,
20,000,000 shares of Common Stock will be outstanding and no shares of
Preferred Stock will be outstanding. The Series A Preferred shall have
the rights, preferences, privileges and restrictions set forth in the
Restated Certificate. All currently outstanding shares of Common Stock
have been duly authorized and validly issued, are fully paid and
nonassessable, and have been issued in compliance with applicable
securities laws. The Company has reserved 80,000,000 shares of Series A
Preferred for issuance hereunder and 80,000,000 shares of Common Stock
for issuance upon conversion of the Series A Preferred. Of the
25,000,000 shares of Common Stock of the Company reserved for issuance
under the Company's 1999 Stock Plan, no options to purchase shares have
been granted, and 25,000,000 shares remain available for future option
grants. Except as set forth above and as provided in the Company's
Restated Certificate and the Schedule of Exceptions, there are no
options, warrants or other rights to purchase or acquire any of the
Company's authorized and unissued capital stock.
3.5 Authorization. All corporate action on the part of the
Company, its directors and stockholders necessary for the authorization,
execution, delivery and performance of the Investment Agreements by the
Company, the authorization, sale, issuance and delivery of the Shares
and the Conversion Stock and the performance of the Company's
obligations under the Investment Agreements has been taken or will be
taken prior to the Closing. The Investment Agreements, when executed
and delivered by the Company, shall constitute valid and binding
obligations of the Company, enforceable in accordance with their terms,
subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies; provided,
however, that the Company makes no representation as to the
enforceability of the indemnification provisions contained in the
Investor Rights Agreement. The Shares, when issued in compliance with
the provisions of this Agreement, will be validly issued, fully paid and
nonassessable, and will have the rights, preferences, privileges and
restrictions described in the Restated Certificate; the Common Stock
issuable upon conversion of the Shares has been duly and validly
reserved and, when issued in compliance with the provisions of the
Restated Certificate, will be validly issued, fully paid and
nonassessable; and the Shares and the Conversion Stock will be free of
any liens or encumbrances (assuming the Purchaser takes the Shares with
no notice thereof) other than any liens or encumbrances created by or
imposed upon the holders; provided, however, that the Shares and the
Conversion Stock may be subject to restrictions on transfer under state
or federal securities laws and restrictions set forth in the Investor
Rights Agreement. The issuance of the Shares is not subject to any
preemptive rights or rights of first refusal.
3.6 Proprietary Rights. The Company has title and ownership of,
or full right to use, all patents, trademarks, service marks, trade
names, copyrights, trade secrets, information, proprietary rights and
processes necessary for its business as now conducted and, to the
Company's knowledge, without any conflict with or infringement of the
rights of others. There are no outstanding options, licenses, or
agreements of any kind relating to the foregoing, nor is the Company
bound by or a party to any options, licenses or agreements of any kind
with respect to the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information, proprietary rights and
processes of any other person or entity. The Company has not received
any communications alleging that the Company has violated or, by
conducting its business as currently conducted, would violate any of the
patents, trademarks, service marks, trade names, copyrights or trade
proprietary rights of any other person or entity. To the knowledge of
the Company, none of its employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of his or her
best efforts to promote the interests of the Company or that would
conflict with the Company's business as currently conducted. Neither
the execution and delivery of the Investment Agreements, nor the
carrying on of the Company's business by the employees of the Company,
nor the conduct of the Company's business as currently conducted, will,
to the Company's knowledge, conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, any
contract, covenant or instrument under which any of such employees is
now obligated. The Company does not believe it is or will be necessary
to utilize any inventions of any of its employees (or people it
currently intends to hire) made prior to their employment by the
Company.
3.7 Registration Rights. Except as set forth in the Investor
Rights Agreement, the Company is not under any contractual obligation to
register under the Securities Act of 1933, as amended (the "Securities
Act"), any of its presently outstanding securities or any of its
securities which may hereafter be issued.
3.8 Governmental Consent, etc. No consent, approval order or
authorization of or registration, qualification, designation,
declaration or filing with any governmental authority on the part of the
Company is required in connection with the valid execution and delivery
of the Investment Agreements, or the offer, sale or issuance of the
Shares or the Conversion Stock, or the consummation of any other
transaction contemplated hereby, except (i) the filing of the Restated
Certificate in the office of the Delaware Secretary of State prior to
the Closing and (ii) the qualification (or taking of such action as may
be necessary to secure an exemption from qualification, if available) of
the offer and sale of the Shares and the Conversion Stock under
applicable Blue Sky laws, which filings and qualifications, if required,
will be accomplished in a timely manner.
3.9 Offering. Subject to the accuracy of the Purchaser's
representations in Section 4 hereof, the offer, sale and issuance of the
Shares and the Conversion Stock constitute transactions exempt from the
registration requirements of Section 5 of the Securities Act.
3.10 Permits. The Company has all franchises, permits, licenses,
and any similar authority necessary for the conduct of its business as
now being conducted by it, the lack of which could materially and
adversely affect the business, properties, or financial condition of the
Company, and the Company believes it can obtain, without undue burden or
expense, any similar authority for the conduct of its business as
planned to be conducted. To its knowledge, the Company is not in
default in any material respect under any of such franchises, permits,
licenses, or other similar authority.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
The Purchaser hereby severally represents and warrants to the
Company as follows:
4.1 Preexisting Relationship with Company; Business and
Financial Experience. By reason of its business or financial experience
or the business or financial experience of its professional advisors who
are unaffiliated with the Company and who are not compensated by the
Company, has the capacity to protect its own interests in connection
with the purchase of the Shares and underlying Conversion Stock.
4.2 Investment Intent; Blue Sky. It is acquiring the Shares and
the underlying Conversion Stock for investment for its own account, not
as a nominee or agent, and not with a view to, or for resale in
connection with, any distribution thereof. It understands that the
issuance of the Shares and the underlying Conversion Stock has not been,
and will not be, registered under the Securities Act by reason of a
specific exemption from the registration provisions of the Securities
Act, the availability of which depends upon, among other things, the
bona fide nature of the Purchaser's investment intent and the accuracy
of the Purchaser's representations as expressed herein. pon which the
Company may rely for the purpose of complying with applicable "Blue Sky"
laws.
4.3 Rule 144. It acknowledges that the Shares and the
underlying Conversion Stock must be held indefinitely unless
subsequently registered under the Securities Act or unless an exemption
from such registration is available. It is aware of the provisions of
Rule 144 promulgated under the Securities Act which permit limited
resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, the
existence of a public market for the shares, the availability of certain
current public information about the Company, the resale occurring not
less than one year after a party has purchased and paid for the security
to be sold, the sale being effected through a "broker's transaction" or
in a transaction directly with a "market maker," and the number of
shares being sold during any three-month period not exceeding specified
limitations.
4.4 No Public Market. It understands that no public market now
exists for any of the securities issued by the Company and that the
Company has made no assurances that a public market will ever exist for
the Company's securities.
4.5 Restrictions on Transfer; Restrictive Legends. It
understands that the transfer of the Shares and the Conversion Stock is
restricted by applicable state and Federal securities laws and by the
provisions of the Investor Rights Agreement, and that the certificates
representing the Shares and the Conversion Stock will be imprinted with
legends restricting transfer except in compliance therewith.
4.6 Access to Data. It has had an opportunity to discuss the
Company's business, management and financial affairs with the Company's
management. It has also had an opportunity to ask questions of officers
of the Company. It understands that such discussions, as well as any
written information issued by the Company, were intended to describe
certain aspects of the Company's business and prospects but were not a
thorough or exhaustive description.
4.7 Authorization. All action on the part of the Purchaser's
partners, board of directors, and stockholders, as applicable, necessary
for the authorization, execution, delivery and performance of the
Investment Agreements by the Purchaser, the purchase of and payment for
the Shares and the Conversion Stock and the performance of all of the
Purchaser's obligations under the Investment Agreements has been taken
or will be taken prior to the Closing. The Investment Agreements, when
executed and delivered by the Purchaser, shall constitute valid and
binding obligations of the Purchaser, enforceable in accordance with
their terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable
remedies; provided, however, that the Purchaser makes no representation
as to the enforceability of the indemnification provisions contained in
the Investor Rights Agreement.
4.8 Brokers or Finders. The Company has not and will not incur,
directly or indirectly, as a result of any action taken by the
Purchaser, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or
the transactions contemplated hereby.
4.9 Tax Liability. It has reviewed with its own tax advisors
the tax consequences of the transactions contemplated by this Agreement.
It relies solely on such advisors and not on any statements or
representations of the Company or any of the Company's agents with
respect to such tax consequences. It understands that it, and not the
Company, shall be responsible for its own tax liability that may arise
as a result of the transactions contemplated by this Agreement.
4.10 Limited Operating History. It acknowledges that the Company
was incorporated on October 8, 1999 as a new business and has a limited
operating history.
SECTION 5
CONDITIONS TO CLOSING OF THE PURCHASERS
The Purchaser's obligation to purchase the Shares is, unless
waived in writing by the Purchaser, subject to the fulfillment as of the
date of Closing of the following conditions:
5.1 Representations and Warranties Correct. The representations
and warranties made by the Company in Section 3 hereof shall be true and
correct in all material respects as of the date of the Closing.
5.2 Covenants. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the
Company on or prior to the Closing Date shall have been performed or
complied with in all material respects.
5.3 Blue Sky. The Company shall have obtained all necessary
Blue Sky law permits and qualifications, or have the availability of
exemptions therefrom, required by any state for the offer and sale of
the Shares and the underlying Conversion Stock.
5.4 Restated Certificate. The Restated Certificate shall have
been filed in the office of the Delaware Secretary of State.
5.5 Investor Rights Agreement. The Company shall have executed
and delivered the Investor Rights Agreement in substantially the form
attached hereto as Exhibit B.
SECTION 6
CONDITIONS TO CLOSING OF THE COMPANY
The Company's obligation to sell and issue the Shares is, unless
waived in writing by the Company, subject to the fulfillment as of the
date of Closing of the following conditions:
6.1 Representations and Warranties Correct. The representations
made in Section 4 hereof by the Purchaser shall be true and correct in
all material respects as of the date of Closing.
6.2 Covenants. All covenants, agreements, and conditions
contained in this Agreement to be performed or complied with by the
Purchaser on or prior to the date of Closing shall have been performed
or complied with in all material respects.
6.3 Blue Sky. The Company shall have obtained all necessary
Blue Sky law permits and qualifications, or have the availability of
exemptions therefrom, required by any state for the offer and sale of
the Shares and the underlying Conversion Stock.
6.4 Restated Certificate. The Restated Certificate shall have
been filed in the office of the Delaware Secretary of State.
6.5 Investor Rights Agreement. The Purchaser shall have
executed and delivered the Investor Rights Agreement in substantially
the form attached hereto as Exhibit B.
SECTION 7
MISCELLANEOUS
7.1 Governing Law. This Agreement shall be governed in all
respects by the internal laws of the State of California without regard
to conflict of laws provisions.
7.2 Entire Agreement; Amendment. This Agreement, including the
exhibits hereto, constitutes the full and entire understanding and
agreement among the parties with regard to the subjects hereof and
thereof, and no party shall be liable or bound to any other party in any
manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided
herein, neither this Agreement nor any term hereof may be amended,
waived, discharged or terminated other than by a written instrument
signed by the party against whom enforcement of any such amendment,
waiver, discharge or termination is sought.
7.3 Notices, etc. All notices and other communications required
or permitted hereunder shall be in writing and shall be mailed by First
Class, registered or certified mail, postage prepaid, or otherwise
delivered by facsimile transmission, by hand or by messenger, addressed:
(a) if to the Purchaser, to:
Rational Software Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax:(▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company, to:
▇▇▇▇▇▇▇▇.▇▇▇, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇
Each such notice or other communication shall for all purposes of
this Agreement be treated as effective or having been given when
received if delivered personally, if sent by facsimile, the first
business day after the date of confirmation that the facsimile has been
successfully transmitted to the facsimile number for the party notified,
or, if sent by mail, at the earlier of its receipt or 72 hours after the
same has been deposited in a regularly maintained receptacle for the
deposit of the United States mail, addressed and mailed as aforesaid.
7.4 Delays or Omissions. Except as expressly provided herein,
no delay or omission to exercise any right, power or remedy accruing to
any party, upon any breach or default of another party under this
Agreement, shall impair any such right, power or remedy of such party
nor shall it be construed to be a waiver of any such breach or default,
or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any
kind or character on the part of any party of any breach or default
under this Agreement, or any waiver on the part of any party of any
provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing.
All remedies, either under this Agreement or by law or otherwise
afforded to any party, shall be cumulative and not alternative.
7.5 Expenses. The Company and the Purchaser shall bear their
own expenses incurred on their own behalf with respect to this Agreement
and the transactions contemplated hereby.
7.6 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, and all of which
together shall constitute one instrument.
7.7 Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to
be illegal, unenforceable or void, this Agreement shall continue in full
force and effect without said provision, which shall be replaced with an
enforceable provision closest in intent and economic effect as the
severed provision; provided that no such severability shall be effective
if it materially changes the economic benefit of this Agreement to any
party.
7.8 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
[Remainder of Page Intentionally Left Blank]
The foregoing agreement is hereby executed effective as of the
date first set forth above.
"COMPANY" "PURCHASER"
▇▇▇▇▇▇▇▇.▇▇▇, INC. RATIONAL SOFTWARE CORPORATION
a Delaware corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇ By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman Title: CFO
[Signature Page to Series A Preferred Stock Purchase Agreement]
EXHIBIT A
(To Series A Preferred Stock Purchase Agreement)
Amended and Restated Certificate of Incorporation
(see Tab 3)
EXHIBIT B
(To Series A Preferred Stock Purchase Agreement)
Investor Rights Agreement
(see Tab 5)
EXHIBIT C
(To Series A Preferred Stock Purchase Agreement)
Schedule of Exceptions
(..continued)
TABLE OF CONTENTS
(continued)